Leaders of Group of Seven (G7) nations have discussed plans to cap the price of Russian oil in order to put the squeeze on Moscow, which is benefiting from soaring energy prices, and cut off its means of financing the invasion of Ukraine.
The United States has suggested a price cap decided by consuming countries, a proposal that was discussed on Sunday by the G7 leaders at a summit in the Bavarian Alps.
Western countries rallied around Kyiv when Russia invaded Ukraine in February, but more than four months into the war, that unity is being tested as soaring inflation and energy shortages rebound on their own citizens.
Chided by Ukraine for not going far enough to punish Russia, G7 leaders were having “really constructive” talks on a possible price cap on Russian oil, a German government source was quoted as saying by the Reuters news agency.
“We are on a good path to reach an agreement,” the official said.
A French presidency official said Paris would push for a price cap on oil and gas and was open to discussing the US proposal.
However, he said the G7 needed to work towards getting a maximum oil price and this needed the buy-in of oil producers in the Organization of Petroleum Exporting Countries and its allies in a group called OPEC+, which includes Russia.
“We need to have discussions with OPEC+ and producing countries to achieve this,” the official said.
The European Union, which plans to ban imports of most Russian oil from the end of the year, has reservations about a US push for a broad oil price cap or “price exception” to restrict Moscow’s energy revenue.
A price exception could work through a mechanism to restrict or ban insurance or financing for Russian oil shipments above a certain amount.
It could prevent spillover effects to low-income countries that are struggling with high food and energy costs.
European Council President Charles Michel also said G7 leaders would discuss a technical mechanism that had the effect of an oil price cap through services related to oil and export insurance.
But Michel said the issue would need to be handled carefully or risk backfiring.
“We are ready to take a decision together with our partners, but we want to make sure that what we decide will have a negative effect [on Russia] and not a negative effect for ourselves.”
Biden hails Western unity
At the start of a bilateral meeting, US President Joe Biden thanked German Chancellor Olaf Scholz for showing leadership on Ukraine and said Russian President Vladimir Putin had failed to break their unity.
Scholz has faced criticism at home and abroad for his handling of Russia’s invasion of Ukraine.
“We can get through all of this and come out stronger,” Biden said.
“Because Putin has been counting on it from the beginning that somehow NATO and the G7 would splinter. But we haven’t and we’re not going to.”
At the start of the meeting, four members of the G7 announced plans to ban imports of Russian gold as part of efforts to tighten the sanctions squeeze on Moscow.
The US, United Kingdom, Canada and Japan will ban Russian gold imports. France also supported the move.
The UK said the ban was aimed at wealthy Russians who have been buying safe-haven bullion to reduce the financial impact of Western sanctions. Russian gold exports were worth $15.45bn last year.
“The measures we have announced today will directly hit Russian oligarchs and strike at the heart of Putin’s war machine,” UK Prime Minister Boris Johnson said in a statement.
“We need to starve the Putin regime of its funding. The UK and our allies are doing just that.”